Buy.com Inc. is hoping to keep going after bumped-up advertising and discounted prices brought what the company calls a solid fourth quarter.
The Aliso Viejo-based company, which competes on cutthroat prices with top rival Amazon.com Inc., ended 2008 on a high note thanks to a slew of advertisements and help from funnyman Howie Mandel.
With the downturn in consumer spending, Buy.com is hoping that Mandel’s appeal will hold out as it capitalizes on discounted commercial time and pushes viral marketing.
“We picked Howie because we had done some testing and our customers seemed to like him,” Chief Executive Neel Grover said. “We’ve seen a nice increase in traffic. Part of our growth is definitely attributable to him.”
The TV actor and comedian, who’s best known these days as the host of the game show “Deal or No Deal,” has lent his face to Buy.com’s TV spots for the past year or so.
Viral Popularity
Mandel’s commercials have become hits on video site YouTube.com, with some 16 million views.
Mandel “likes to do a lot of unscripted things,” Grover said. “He’s funny and there’s a viral aspect to the commercials. It’s a good way to get in front the consumer.”
The most recent spot features Mandel checking up on his kid at his first day on a new job. He finds him busy buying Microsoft Corp.’s Xbox at Buy.com, touting a better deal than either Wal-Mart Stores Inc. or Best Buy Co. offer.
The commercial features his actual son, Alex, paying for the purchase with,wait for it,Mandel’s credit card.
Another popular commercial, which has some 6 million YouTube views, features Mandel surprising a laid-back skater on the street with an Xbox 360, which turns the skater into a thrilled Buy.com advocate.
“He helps us get a positive image out there and have customers realize that it’s a fun place to show where you will get value for your dollar,” Grover said.
Buy.com has been able to get better TV spots because the price of airtime has come down along with the advertising market.
“We’ve seen some more opportunities to go mainstream,” Grover said. “You are seeing us more and more in the offline world.”
That is bringing more customers online. The holiday shopping season,which typically stretches from Thanksgiving until New Year’s,went better than expected for the company.
Thanksgiving weekend marked some of “the biggest sales days in company history.” Revenue and customer orders increased by more than 40% on Thanksgiving weekend compared to the same days a year earlier.
Privately held Buy.com doesn’t disclose sales figures. The Business Journal estimates that the company sees roughly $500 million in yearly revenue.
“We had a great December and the quarter ended really strong,” Grover said. “We have solid double-digit top line and bottom-line growth.”
Buy.com is looking to bring out the big guns in order to compete with shoppers that “are definitely more cautious with their dollars,” Grover said.
It competes tooth and nail,largely on price,with Wal-Mart, Best Buy, Barnes & Noble Inc. and Dell Inc.
Buy.com is especially aggressive in competing with Amazon.
“We see about 90% of the time our prices are lower than on Amazon,” Grover said.
To better compete, it’s expanded its selection of products in order to offer more than one brand of the same item.
“We are seeing customers trade down from a top-tier brand to a mid-tier brand,” he said. “They are looking for a ‘good, better, best’ type of selection.”
For example, Buy.com will carry multiple brands of 42-inch flat panel TVs.
“Customers want to see the best price on the big-name brand and compare it to the lesser-known, lower-tier brand,” Grover said.
It’s also added more products to a category it dubs “soft goods,” including baby items, clothes, jewelry, shoes and fragrances.
Buy.com said it has nearly 5 million product listings, including its staples of consumer electronics, small appliances and computer-related gear.
A big part of its strategy is building trust with customers.
If a product has a shipping charge, Buy.com will tell the buyer about it upfront, instead of slapping it on at the end of the checkout.
It also has a price comparison on its product pages.
“We want to tell our customers where they can get an item cheaper, even though it might send them off to a competitor,” Grover said. “We want them to keep coming back to start their shopping with us.”
Lean Business
Buy.com is able to offer cheaper prices because of its extremely lean business model,it has roughly 145 workers here.
It keeps no product inventory under its roof like some of its retail competitors and Amazon.com do. Instead, it contracts with distributors who do all of the back-
end work of storing, packing and shipping products.
“The core of our model is very different than Amazon’s and different from a brick-and-mortar retail store,” Grover said. “To have the big infrastructure and showrooms, sales people and taking in and keeping inventory is very costly.”
Buy.com is one of Santa Ana-based Ingram Micro Inc.’s top customers, according to Grover.
The company has roughly 30 distributor partners in all.
“Consumers realize that a site without physical inventory will be able to offer lower prices,” Grover said. “We tie into the largest distributors around the country and we constantly have them compete with each other for the lowest prices to us. It allows us to pass it on to customers and helps with margins tremendously.”
